2018.05.3119:40:00UTC+00U.S. Consumer Spending Gains Momentum, Inflation on Steady Footing

U.S. consumer spending recorded its biggest increase in five months in April, adding to signs that economic growth was regaining steam in the second quarter, while inflation continued to steadily accelerate.

Consumer spending, which represents more than two-thirds of U.S. economic activity, surged 0.6 percent in the previous month, according to the Commerce Department. This marked the biggest increase since November and came after a 0.5 percent increase in the prior month.

Economists had expected consumer spending to rise 0.5 percent. Spending was bolstered by higher prices for gasoline and other energy products. Nondurable goods purchases increased 0.9 percent. There were also observed increases in buying of long-lasting goods. Outlays on services rallied 0.5 percent, boosted by the demand for household utilities.

When adjusted for inflation, consumer spending rose 0.4 percent in April after increasing 0.5 percent in the previous month month. That indicates an acceleration in consumer spending after it grew at a 1.0 percent annualized rate in the first quarter, the slowest rate in almost five years.

Prices continued to gradually increase in April. The personal consumption expenditures price index, which stripped out the volatile and energy components, rising 0.2 percent for the third consecutive month.

The increase brought the annual increase in the core PCE price index, which is the Fed's preferred inflation measure, at 1.8 percent. The U.S. central bank has a 2 percent inflation target. Economists expect the annual core PCE price index will hit the Fed's target in the coming month.

The data had little effect on the U.S. financial market. The dollar fell against the euro on signs of easing political tensions in Italy. Prices for U.S. Treasuries increased.